The Gist of Crypto Tax Software and How it Can Be a Lifesaver
There is crypto tax software that can potentially help you in terms of reporting cryptocurrency gains and losses at tax time. We explain your crypto tax software options.
There are a number of crypto tax software solutions to be found online.
In general, you need to pay a fee to use the crypto tax software. Then you give the software READ ONLY access to your trading history via an exchange’s API, import data from a CVS file, or enter it by hand (you can also give it access to wallet data).
Doing that can produce something your account can work with (the raw transaction data isn’t going to have dollar values, and that raw data could, understandably, be too much for your CPA to handle).
I have reviewed one option Cointracking.info (click this link for a review). I won’t go into every detail here, but I will say that I recommend using software like that overdoing everything by hand if you did any substantial amount of crypto-to-crypto trading.
The software doesn’t replace your CPA, it sort of acts as a bridge between the gibberish the exchanges give you and what your CPA can understand. And it is that which is important.
If you don’t want to use the software I reviewed, then here is how you search for more of them to research yourself: “name of exchange + tax calculator” or “cryptocurrency tax software.”
You will need to double check the software’s work against your own records. Still, for those who did a lot of trading, this sort of software could be a necessity.
The reality is many of us crypto traders are caught in a giant trap right now. We show gains from 2017 due to crypto-to-crypto trades which produced on-paper gains, don’t have those gains here in 2018 (thanks correction), and now are stuck figuring out the fair value of crypto-to-crypto trades so we can pay taxes on gains we never really saw with money some of us don’t have.
That trap has been set, many of us are ensnared, so now it is about damage control. It only gets worse if you don’t do the next part right (the proper reporting to the IRS with the help of a CPA). In this sense, the crypto tax software programs out there are worth every headache they themselves come with.
The real benefit then is that these types of software can give you a list of all trades with fair market values and dates to correspond with trades. And, if you can edit out all the mistakes it is bound to make, it can also give you most if not all of the information in a style that you will need for tax reporting!
The bottom line here is this: if you are a normal person neither you nor your CPA isn’t going to know what to do with your trading history. That is frustrating. However, if you take the time to use the software, you CAN hand your CPA something they CAN use (or produce something you can yourself use), and then you will potentially avoid owing the IRS a fee on the money you don’t have on top of what you actually owe. As a bonus, if you stick with the software and use it to keep records during the year, next tax season will be a lot easier to deal with. The software I’ve tried had issues, but even with the issues, I find its useful and nearly vital. Thus, I strongly recommend checking the options sooner rather than later.
NOTE: There are problems with the tax software I’ve used, and I did need to go in and tweak a lot of things by hand. From what I understand this problem is common with all crypto tax software. With that said, what it did get right, paired with my ability to make edits, has saved me from having to accomplish what was nearly literally an impossible task (converting crypto values from trades to dollar values at specific dates and times). The software will likely require a lot of work by hand and won’t be usable for filing taxes directly, but it will help you to prepare what you need for your accountant, and that is important. Make sure to compare the output of the software to your records if you can (and if you think the profit or loss is wrong, it probably is, so re-check the data and make edits as needed).
TIP: Learn more about what is required on crypto and taxes from the IRS.